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Money Matters
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Picking the right financial adviser

Dear Money Matters,
I'm beginning to panic. I'm afraid that I started saving too late in life and that I won't have enough to retire without working a part-time job. I'm also worried about picking an investment adviser on my own. Could you recommend, or help me find, a great financial consultant? Any advice you can give will be greatly appreciated.
Carlotta

Dear Carlotta,
You can use any of several strategies to track down a financial consultant. You can always go to a nearby stock brokerage house and ask to be assigned someone, but that's very much a shot in the dark.

Moreover, unless you're bringing a good sized cache of cash to the table, many houses routinely assign less-experienced brokers to smaller accounts. That may mean you can end up with someone who's more in tune with MTV than mutual funds. But, if a stock broker interests you, ask your friends and colleagues for a recommendation. Chances are that someone's working with a broker with whom they're happy.

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Another option is tracking down a financial planner. These people often offer a wide range of services, covering investments, budgeting, insurance and other elements of your overall financial life. There are several sorts of designations that apply to various sorts of planners:

  • Certified Financial Planner (CFP): This is a planner who has passed exams accredited by the Certified Financial Planner Board of Standards, a regulatory body that sets CFP standards. The tests address an applicant's ability to work with clients' estates, insurance investments and tax affairs.
  • Chartered Financial Consultant (ChFC): This is a designation awarded by the American College in Bryn Mawr, Pa., to financial planners who complete 10 courses and 20 hours of examinations covering economics, insurance, taxation, estate planning and other related areas. They must also have at least several years' experience in the field of finance.
  • Chartered Financial Analyst (CFA): Awarded by the Institute of Chartered Financial Analysts, this designation focuses on portfolio management and securities analysis. It also covers economics, financial accounting, portfolio management, securities analysis and standards of conduct.
  • Registered investment adviser: Someone who has received approval from the Securities and Exchange Commission to give financial advice to clients for a fee.
  • Registered representative: The official term for a stockbroker or account executive with a brokerage firm. To be registered, a broker must pass licensing exams administered by the National Association of Securities Dealers. Some states mandate additional testing.

Bear in mind, that these sorts of designations don't guarantee that a certain planner is suitable to you and your needs:

  • Ask friends and co-workers for recommendations. If someone's satisfied with her planner, ask her how she works with the planner -- does she just invest or is she involved in other activities such as estate planning or saving money for a child's college education?
  • Try to work up a list of several candidates and interview them. Ask about their experience, training and other elements of their professional background. Ask if they've ever been disciplined for any reason and, if so, don't be shy about asking about the particulars.
  • Ask the planners if they work with anyone with a situation similar to yours. Have them detail precisely what they do and how they arrived at those financial choices. Ask them for a sample of their work to gauge the depth of their financial advice and whether it's suited to your needs.
  • One key element -- ask for referrals to clients with whom the planner has worked. If the planner balks or starts spewing some blarney about confidentiality, grab your wallet and make for the door. Planners on the up and up should be more than happy to substantiate their successes by letting you talk with other clients.
  • Ask how the planner will be compensated. As a general rule, it's often wise to stick with fee-only planners who levy a flat fee or who work by the hour. By contrast, planners who push commissioned-based products may be tempted to recommend investments that pay them the biggest cut, not necessarily those that best fit your financial circumstances.

Here are some Web sites that provide additional information and ways to hook up with a planner in your area:

-- Posted: June 19, 2002

More Money Matters columns
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See Also
10 key questions to ask a financial planner
How to check out a financial planner
Financial advice glossary
More Money Matters stories

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